Future boss predicts expansion at Scottish Radio Holdings

0 Comments | Sunday Herald, The, May 30, 2004 | by Arthur MacMillan

THE boss in waiting at Scottish Radio Holdings has insisted that the business will continue to expand despite incessant talk of a takeover by Emap, already a major shareholder in the company.

David Goode, who will become chief executive of SRH in four months' time, said the Clydebank-based radio group and newspaper publisher will face its own challenges in the next 18 months, with several radio licences up for grabs from Ofcom, and existing stations requiring development. He said: "We want to expand the radio division and the only way we are going to do that is by getting more licences - that means Edinburgh, Manchester, Belfast and the south of England."

Goode's comments follow further speculation last week that magazine and radio giant Emap, which bought SMG's 27.8% stake in SRH in January, was lining up a takeover bid for SRH. Analysts recently suggested that Goode's promotion - he takes over from Richard Findlay at the end of September - was another signal that a bid for the company was in the offing.

Emap's finance director Gary Hughes last week hinted that a bid, which under the terms of the shares deal with SMG will become possible by mid July, is likely, saying that a "combination of the two firms would create a pretty powerful force". However, Goode pointed out that reports in The Herald, which played down talk of a takeover, and in The Scotsman, which played it up, reflected the fact that the future was still unclear.

He said: "[Emap] has near to a 28% stake and while we respect them as a major shareholder we run the company for the benefit of all shareholders. Since there was talk of the Competition Bill [now enshrined in the Competition Act] there was an expectation of consolidation in the radio sector but it hasn't happened like that. Companies talk to each other and we recognise the interest that Emap has in SRH but we are not preoccupied by it."

However, in an interview with the Sunday Herald, Hughes again suggested that a takeover was possible. "We would not have taken the [27.8%] stake unless there was compatibility," he said, adding that Emap had not asked for representation on the SRH board because it "would compromise [its] position".

SRH's interim figures recently showed pre-tax profits had risen from (pounds) 9.6 million to (pounds) 10.9m, with turnover up 14% to (pounds) 47.2m.

Goode, who is currently the managing director of SRH's radio division, said its focus was in ensuring that Vibe FM began to pay dividends for the group. Vibe, based in Bristol and Bury St Edmunds, was purchased a year ago from the GWR group.

Goode said: "We had to move them out of GWR and into new studios last autumn and they have not been in a position to move forward. They both lost a small amount, less than six figures, last year but they are now making money and the challenge for us is to get them delivering the kind of margins enjoyed by our more established stations."

Similarly, revenues from Wave FM, based in Southampton, have some way to go until they reach parity with the revenues generated by the group's best-known stations, Radio Clyde and Radio Forth. "Margins are now in the teens or low 20s, but there is still quite a lot of growth there," Goode added.

Goode, 56, has been on the SRH board for seven years and first became involved with the company in 1975, when he worked for Broadcast Market Services in London, selling commercial radio advertising. His career began in 1966 when he joined ABC Television from where he moved to Thames and then on to the magazine publisher, IPC.

Goode believes his appointment as SRH chief executive will ensure "very clear continuity" at the company, although he will want to put his own stamp on the job. "Clearly, in due course, I will have ideas of my own that I want to put in place," he added.

One of his first challenges will be to try and obtain the Edinburgh FM licence, to be advertised by Ofcom next month. While he acknowledges that a "skeleton" plan for the licence application is already in place, rival bidders will have three months to submit their proposals. They include Real Radio and Castle FM, headed by Sir Tom Farmer and backed by Emap.

Goode said: "We are hoping that we will be rather more successful in applying to Ofcom than we were under the Radio Authority, who seemed very reluctant to give licences to established radio groups."

Goode added that SRH may consider further acquisitions in the local newspaper market, but admitted that the group's 45 existing titles, including The Stornoway Gazette and The Galloway Gazette, could become a target for publishers such as Edinburgh-based Johnston Press. "We know that people are interested in them," said Goode. "We have put together a good group of newspapers which could appeal to any publisher."

Goode would not rule out further acquisitions for SRH. He said: "We remain interested in weekly titles if the right opportunity comes along but we are not about to overpay. There would have to be synergies for the group."